Young folks: remember, you can always declare bk after a bad options investment. Unlike student loans.
"The unfortunate thing is there are certain situations where RH will show this kind of amount due, but it is an anomaly for 24 to 48 hours as things process when selling calls and puts. Uneducated traders think they actually owe these amounts which is not close to accurate[.]"
That explanation would make more sense; I don't see how Robinhood could allow inexperienced traders such amounts of unsecured margin and survive as a business.
Things that should make sense often don't.
(Just FYI, if you go on r/wallstreetbets, you will see this countless times...the software not showing the correct position, the software not showing the correct position and then forcing users to trade such that they lose money, it goes on and on and on...this business isn't complicated, you had men and women with high school level educations running these positions for decades without these problems...one touch from the "geniuses", kaboom...again, very little about what Robinhood do makes sense, it is baffling that they are even regulated to handle money.)
The issue is that some people don't understand how option trades work, in this case a credit spread with 2 legs of a trade. One side was exercised and would have been offset by the other side when the broker got around to it, but it's not incorrect data.
It's up to the trader to understand their trades.
Specifically, in a spread he might have lost 770k on his short but up 760k on his long, so his actual loss at the end was just 10k.
https://www.google.com/amp/s/www.politico.com/amp/story/2019...
The idea that DeVos, whose family owns a school lending company, is in the administration is not just a conflict of interest, but an indictment of our entire political system.
this student loan construction is certainly the current state of the USA
Ironically, I get the sense that the implosion is probably going to come less from it being a previously bloated, overpriced commodity than for now being a perceivably fraudulent one -- IE, students are (justifiably) heated about having to pay the equivalent price of a home to take a glorified webinar from "Zoom University" -- and who can blame them, really?
Now, back on topic -- what happened here was tragic. At some point, Robinhood is going to get actually sued by someone who expects peer level performance (IE TD/tastyworks/etc). It'll be interesting to see what happens there. And, it'll be interesting to see if they are sued (successfully) here. But, nothing is going to bring this young person's life back. How utterly harrowing. We hear so often about deaths of despair as a coded reference to opiate deaths. I know that suicide is a really major risk for startup founders when things go sideways (as well as gamblers), so seeing a new version of that makes me (despite the desensitization of the present moment) experience a new, unique kind of sadness. I hope this poor young man's soul rests in peace.
But there's a practical problem applying this to student loans -- nobody who needs student loans will come out of college with meaningful assets. No house, maybe no car, no income. If you could discharge student loans in bankruptcy... there's absolutely no reason to not do it immediately upon graduation. Everyone would do declare BK and clear their debts, for good reason.
So nobody would ever give a student loan. Also for good reason.
So BK doesn't apply to student loans. Obviously there are other fixes here (government paid tuition, income based repayment, online classes, whatever), but the naive fix ("allow students to discharge loans") would not get us to a better-functioning outcome.
(unless your position is that burning the system down is a better outcome than status quo, which is a position, but it's then dishonest to argue that discharging loans is a "quick fix")
That's my understanding of why student loans have to stick with you.
There is one important difference between student loan and other loans. If your mortgage gets foreclosed, you lose your house. Your car loan, you lose the vehicle. Margin, you lose your stocks and investments and the collateral. In all these cases, when you cannot pay back the loan, the lender takes away your right to continue enjoying any benefits from the loan. You cannot not repay your mortgage but keep the house free and clear. Thus there is a strong incentive not to default on these loans.
This is fundamentally different from student loans. If you do not repay your student loans, the bank cannot wipe the knowledge you gained from your brain and sever the contacts you made in university. You will continue enjoying all the benefits of the education. Thus there would be a strong incentive to declare bankruptcy as soon as you graduate (because you have little to no assets to lose) if this were an option.